September 16, 2012
Landing a contract with a large customer is always a great milestone in the life of a business. It’s an opportunity to grow both the top and bottom lines, build your corporate reputation and achieve greater economies of scale.
But it can also be a huge challenge that can quickly turn the thrill of victory into the agony of defeat if not properly handled.
To get your business geared up, you will probably have to make some important decisions. These can include whether to:
- Add employees;
- Increase production or open a new location;
- Line up additional financing;
- Purchase equipment, machinery or technology;
- Align your processes and certifications with those of your larger partner;
- Assign new responsibilities to your management team.
It makes for a tall order for an entrepreneur. And you will have to pull it off while still delivering on your promises to your other customers.
“Entrepreneurs often take the attitude: Let’s get the contract first and we will figure out how to deliver later,” says Pam Horan, Manager of BDC’s Toronto Business Centre. “But this approach won’t take you very far in the long run.”
She says it’s critical to make a detailed plan before you win the contract, mapping out how you are going to deliver on your promises to your new business partner.
As part of the planning process, you should call your banker as early as possible to make sure you will be financially ready for the new opportunity.
Your financing needs may fall into a number of categories.
- You might need to increase your working capital.
- You might need financing for new equipment or machinery.
- You might need to add Information and Communications Technology.
“I have been a banker for more than 15 years,” Horan says. “And I can tell you that approaching your banker in the very early stages of negotiations with a large client can increase your chances of success in landing the financing you need.”
Your banker will be looking to answer several questions.
- Do you have the ability to manage a more complex business?
- Are your forecasts, assumptions and plans realistic?
- Do you have a solid credit history and adequate financial capacity?
- Do you have a clear understanding of your new business partner and the details of your arrangement?
- To what extent is the new contract increasing your dependency on one client and how is this changing the risk profile of your business?
By carefully planning, you will be helping to establish trust with both your new partner and your banker. Then, delivering on your promises will help cement the relationships for the long term, Horan says.
“Keep a close eye on deadlines and the quality of your work. Remember the reasons that got you the contract in the first place. Don’t stop investing and improving.”
Related articles:
Additional resources: